Indonesia’s Economic Growth Requires Careful Interpretation

Indonesia’s Economic Growth Requires Careful Interpretation

Headline: “Ammunition, Resilience, and Courage: Three Challenges Behind the 5.61% Growth Rate”, Jakarta

Critics from institutions including INDEF, LPEM FEB UI, and CELIOS have argued that assessments of economic growth cannot rely solely on defending statistical methodologies. Instead, analysis must focus on the quality and long-term sustainability of the growth itself.

This perspective was outlined by Dr. Ariyo DP Irhamna in his response titled “Ammunition, Resilience, and Courage: Three Challenges Behind the 5.61% Growth Rate”, a reflection on an article by Anggito Abimanyu, reproduced here without editing.

klikinfosuararakyat.com
Jakarta, 17 May 2026 — Dr. Ariyo DP Irhamna, a lecturer at Universitas Paramadina, emphasizes that Indonesia’s 5.61 percent economic growth in the first quarter of 2026 must be interpreted cautiously. He notes this figure is supported by short-term fiscal stimulus while facing growing structural pressures.

Responding to Abimanyu’s earlier analysis questioning the quality of Q1 2026 growth, Ariyo reinforces concerns raised by INDEF, LPEM FEB UI, and CELIOS. He stresses that defending growth data through statistical arguments alone is insufficient; the real measure lies in whether that growth is meaningful and sustainable.

He points out inaccuracies in previous comparisons regarding inventory changes. The jump in inventories from IDR 4.2 trillion to IDR 104 trillion occurred on a quarterly basis, not annually as claimed. Year-on-year, inventories rose only from IDR 85.2 trillion in Q1 2025 to IDR 104 trillion in Q1 2026 — an increase of around 22 percent.

Rising inventories do not automatically signal weak domestic demand, Ariyo explains. They can also reflect stockpiling ahead of Ramadan and Eid al-Fitr, expectations of higher consumption, or advance imports.

He also addresses the apparent contradiction between a 0.99 percent contraction in electricity and gas supply and 5.04 percent growth in manufacturing. Data on industrial electricity sales actually shows expansion.

“What seemed like an odd inconsistency is just a lingering effect of 2025 pricing policies — not a flaw in BPS statistics,” Ariyo writes.

The low base for comparison in Q1 2025 was shaped by a 50 percent electricity tariff discount that temporarily boosted household consumption. When the discount ended in 2026, consumption returned to normal, creating a statistical drag on the electricity sector’s growth rate.

Beneath the headline 5.61 percent figure, Ariyo argues economic strength is fundamentally weaker. Government consumption grew 21.81 percent year-on-year, contributing about 1.26 percentage points to total growth. Without this spending boost, he estimates growth would likely stand between 4.4 and 4.6 percent.

“Reading 5.61% as a sign of strengthening momentum is misleading. Momentum is actually slowing — the only reason the number looks high is that the 2025 baseline was exceptionally weak,” he states.

Ariyo also highlights the gap between manufacturing GDP growth and the Purchasing Managers’ Index (PMI), which fell to 49.1 in April 2026 — entering contraction territory.

“If sustainability is the real concern, this indicator is the strongest evidence, and it was overlooked,” he notes.

Maintaining growth is becoming increasingly costly. The state budget’s primary balance shifted from a surplus of IDR 21.9 trillion in Q1 2025 to a deficit of IDR 95.8 trillion in Q1 2026. Meanwhile, debt interest payments rose 18.6 percent year-on-year to roughly IDR 144.3 trillion.

Additional pressures include surging energy subsidies and compensation, the rupiah weakening past IDR 17,605 per US dollar, and foreign exchange reserves declining for three consecutive months.

Rupiah depreciation reduces incomes when measured in dollars and moves Indonesia further from its goal of becoming a high-income country. “Every 1 percent weakening cuts USD-denominated GDP per capita by about USD 52 — roughly equal to one year of real per capita growth,” Ariyo explains.

Export structures remain heavily reliant on natural resources and nickel processing. At the same time, trade surpluses shrink when the rupiah falls, revealing weak competitiveness in non-resource manufacturing exports.

“Indonesia depends heavily on nickel downstreaming while losing volume in coal, agriculture, and oil and gas,” he says.

Domestically, non-performing loans in property financing rose from 3.08 percent to 3.24 percent by February 2026, while the real estate sector grew only 3.54 percent.

“Property is a barometer of middle-class conditions — and right now, that barometer is under pressure,” he writes.

As a policy alternative, Ariyo urges faster investment in productive capital projects and reform of energy subsidies to target support directly at low-income households. This approach, he argues, is more sustainable than relying on bond market interventions or short-term stimulus just to prop up growth figures.

“The question being ignored is: do we want quality growth, or just quantitative growth?” Ariyo asks.

Ultimately, the debate should not center only on whether the numbers are correct, but on who bears the cost of keeping growth at current levels.

“The real issue is the price various groups in society are paying just to maintain this pace of expansion,” he concludes.
Klikinfosuararakyat.com, Rofinus Bria,#EastNusaTenggara #IndonesiaTravel #Kupang #IndonesiaCulNTTture .